40. Are you making any further efforts to make
sure that these people receive their money?
(Sir Nicholas Montagu) No.

41. So there are 900,000 people out there who
are owed £13.5 million and at present do not know it.
(Sir Nicholas Montagu) No. Again, I emphasise that
it looks as though 85 per cent of the people we contacted and
who contacted us back had paid the right amount of tax. Take in
that case, if you will, your 1.04 million, let us call it one
million because your head for figures is better than mine, in
that case what we are talking about is 850,000 people who paid
the right amount of tax. If you are saying that among the remainder
it looks as though there are still overpayments, yes, we have
contacted them, we have made every reasonable effort to contact
them; relatively few160,000have responded. As I
think I said at a previous hearing, we have to judge the point
at which there are diminishing returns and at which our people
and our money are better employed getting on with day-to-day customer
service.

Geraint Davies

42. Would you accept that in constructing a
tax system there is a need to balance simplicity and fairness
and what in essence the Chancellor is doing through a system of
working families' tax credits and other tax credits is trying
to introduce a reasonably complex system to deliver social justice?
That is very straightforward. That is true, is it not?
(Sir Nicholas Montagu) That certainly is the way in
which the Chancellor presents his policies.

43. Well said.
(Sir Nicholas Montagu) When you are as old as I am,
you get cautious.

44. I notice that you are not in fact that old
and you should be with us in four years' time unless you retire
at the early age of around 60.
(Sir Nicholas Montagu) I am afraid the Civil Service
has these repressive policies. It has not heard of the third age.

45. Well, we hope to see your portal again.
Given that this is a complex system and it is evolving quite quickly
into new consolidated tax credit systems, child tax credit, working
tax credit, etcetera, against that your statement this afternoon
to Mr Rendel that the computer system is pretty inflexible, is
that not something for us to worry about? Does not inflexibility
at a time when we are having continuous change imply problems
both for take-up, accuracy and fairness.
(Sir Nicholas Montagu) No, we are talking two different
worlds, quite honestly. Self-assessment came in five years ago.
You know better than I just what advances have been made in technology
since then, and you mentioned the portal a moment ago. It is certainly
true that the computerised environment for self-assessment is
inflexible. What we are aiming to do is to design the massive
computer system which we will require for new tax credits to be
as flexible and as user-friendly to every one operating it as
possible. Dave, here, is the programme sponsor at board level
for tax credits and if you would like more detail, I know he can
supply that for you.

46. What I am really getting at is that you
know this Committee has had a number of reports on the national
insurance system and the difficulties of implementing new computer
systems. What we are talking about this afternoon is the problem
of transferring information to an income tax system and national
insurance system at a time that the Chancellor is quickly changing
the tax law for understandable reasons.
(Sir Nicholas Montagu) If I may say so, I do not think
that is wholly right. What we are talking about in the context
of the so-called open cases is a hangover from a specific problem
in one specific year, 1997-98, in the transmission of data from
the national insurance recording system to the system

47. That is all sorted out now, is it?
(Sir Nicholas Montagu) That is completely sorted.
We are talking about a completely distinct system for new tax
credits.

48. Just because there was a problem in the
past it is obviously logic that there is no particular reason
why there should be one in the future.
(Sir Nicholas Montagu) Exactly; yes.

49. I notice you are a philosopher. Excellent.
In terms of the confidence we have in the system, obviously there
has been some dialogue with the C&AG about access to employers
and you have made the point that the Government are interested
in not putting any more burdens on small business. Would it not
be the case that if the NAO in fact went in with your compliance
people, it would be possible to do it with one check without a
massive over-burden? Would there not be a practical way of doing
this without having a significant impact and indeed, presumably
that would be done with a sample of employers, you would not want
to do it with everyone? You would just want to get a taste of
the real accuracies you were achieving.
(Sir Nicholas Montagu) I have to say, with the greatest
respect to the National Audit Office, our people are experts in
a way which by definition, with their wider remit, Sir John's
people cannot be. We can get in there, get at things pretty quickly,
pretty expeditiously and get out.

51. My suggestion is that they go in with you.
They are the normal squaddies next to the SAS and they just look
at a particular area.
(Sir Nicholas Montagu) If you asked the SAS whether
they would like to have a few squaddies with them on their next
expedition, you might get the same answer I am respectfully giving
Sir John.

Chairman: I think it is le"se
majeste« to accuse Sir John of being a squaddy.
(Sir Nicholas Montagu) Sir John is a Field Marshal,
but he has the odd squaddy working for him.

52. I withdraw that analogy: active partner.
You mentioned a moment ago that when you do compliance tests,
the tax credit issue is one of 74 possible errors by employers.
That illustrates that there is a lot of stress and strain on employers,
but also, if you are saying this is just one area, this is quite
a large area because there is a variety of different tax credits
available and it is quite a significant area from the point of
view of an employer. What I am talking about is the NAO accompanying
one of your compliance people looking at 74 possible error areas
and focusing in on the tax credit issue as particularly significant.
Why can they not do that? It seems quite reasonable in a certain
number of cases?
(Sir Nicholas Montagu) I am very happy to talk with
Sir John about the best way of giving the National Audit Office
the assurance which they are seeking. My worry is that with the
best will in the world, an extra party in on the act would increase
what employers see as a burden.

53. I know that, but there is a cost and benefit.
What we want is the assurance that these systems are in fact working.
We are not looking to have access to all employers, but to do
a certain amount of sampling alongside your people.
(Sir Nicholas Montagu) I am happy to talk to Sir John.

54. At the moment you do not know that you are
delivering the outputs you are suggesting you are.
(Sir Nicholas Montagu) Essentially what Sir John's
people would be doing would be giving an assurance that we are
doing the work properly.

55. No, not you, that the employers are.
(Sir Nicholas Montagu) I am sorry, we need to get
one or two things absolutely straight. First you said that there
are a whole lot of tax credits. There are not. There is the disabled
person's tax credit and there is working families' tax credit.
End of story. Those are the only credits paid via the employer.

56. There is the children's tax credit.
(Sir Nicholas Montagu) Yes, there is the children's
tax credit, which operates slightly differently.

57. There is the housing credit as well. I shall
tell you about that later.
(Sir Nicholas Montagu) Housing credit?

58. I do not think this will be the end of all
tax credits.
(Sir Nicholas Montagu) The Chancellor has not told
me to the contrary yet.

59. There are complexities here as regards an
employer filling in these things. The issue is whether the NAO
can simply come along and check this out. Yes, they are checking
that your people are doing it correctly as well as checking employers.
(Sir Nicholas Montagu) No, I am sorry, I think this
is a genuinely important point. They are not checking up on whether
the employer is doing it right. What Sir John's people are doing
is quality assuring the efforts of my people in ensuring that
employers have got it right.